"You're not going to believe this but, because of you, we averted our first chargeback today. We received an order to be shipped to Poland placed by someone in the US. They wanted to spend $54 to have it shipped air mail. The AVS gave us an NYZ so we went ahead and followed your instructions. The name, address and phone number were correct but we still weren't comfortable with it so we called the customer. Thanks to us he found out that his corporate card number had apparently been stolen! I'll bet that if it were not for your article today, we would have accepted the NYZ rating and shipped the order. Especially, since we were never told what all of the letters stood for. We were spared a $114.00 chargeback and we have you to thank. " -Dawn & Alan Powell

Credit Card Verifications Part I

With the holiday season rapidly approaching, it’s important to know retailers bear the primary responsibility for ensuring credit card transactions are legitimate before filling orders. In other words, if a credit card is stolen, and you fail to take the important steps to verify the legitimacy of the order, you will be left holding the bill when the cardholder challenges the purchase.

Be Diligent...VERIFY!

Even if you accept the best credit cards, its important to run verifications when necessary. Don’t make the mistake of thinking obtaining an approval code ensures a transaction is legitimate. It doesn’t! An approval code only means the credit card is active and the funds are available. It is your responsibility to make certain the cardholder is making the purchase rather than a thief.

If you operate a brick and mortar store, it is crucial to carefully check a photo ID, examine the credit card and note the CVV2 code on the back of the card. Carefully compare the signature on the receipt with the signature on the card. You may also take added precautions and record the customer’s billing address as well as the billing phone number. If you are suspicious of a particular person, call the cardholder’s bank directly to verify the information further. Follow your instincts, they’re usually right!

If you’re one of the many retailers with an e-commerce presence, verifying e-commerce orders takes a little more diligence. Of far more importance to whether a credit card transaction is approved or declined, is the AVS response code given for that transaction. If you are not receiving an AVS code for each credit card transaction made on your site, call your payment gateway to get this crucial information.

AVS stands for Address Verification Service. This code will tell you whether or not the address given in the order actually matches that of the cardholder. On my real-time processing system, the AVS code is comprised of three numbers. The first corresponds to the numbers in the street address. The second corresponds to the zip code. And the third is an overall verification of both. For example, an AVS code of YYY means: "yes" the address matches, "yes" the zip code matches and "yes," both the address and zip code match the cardholder's. But an AVS response code of NYZ means "no" the address does not match, "yes" the zip code matches and only the "zip" code matches.

There are about ten different letters used for AVS response codes, and it's important for you to know all of them and what each means. For a list of the most common AVS response code letters and their meanings, visit http://www.jewelryimpressions.com/fraud.html

If a transaction is approved with an AVS response code of YYY, AND if the order is to be shipped to that same address in the cardholder's name, then you likely have a legitimate order. For larger orders, you may still want to verify the telephone number and call the cardholder directly to verify the purchase. And send the package signature required.

If you receive an AVS code that is unacceptable, you should do further verification. You can get full name, address and phone number verification directly from Discover on those purchases. Most American Express transactions can be verified directly with AmEx as well. However, when calling on Visa or MasterCard purchases, you must contact your merchant provider. Mention that you are calling for a cardholder's issuing bank phone number. You will need to give your merchant number and the credit card number in question. They will then give you the number of the issuing bank for the credit card in question. Call the issuing bank stating you are a merchant requesting a “name, address and phone number verification.”

Calling the actual issuing bank of a cardholder has many advantages over simply calling your merchant provider for address verification. The issuing bank can verify not only the address and zip code of a cardholder, but also the cardholder's name and phone number. You can even inquire if an address mismatch is due to a P.O. Box listing rather than a physical street address. The issuing bank will also have the most current information available. If a cardholder has recently moved, the new address information may not yet be updated with your merchant provider.

Make an informed decision about shipping the order after verifying the information. Be sure to take detailed notes when you call the issuing bank for verification so you'll have the information if you need to defend yourself against a chargeback later.

Be Observant! YYY can still mean "No, No, No!"

Don't be fooled by YYY response codes. Some crooks have access to the cardholder's address information. Be observant and recognize red flags. Be suspicious of sizeable purchases being shipped to alternate addresses, especially if express shipping is requested. Pay attention to whether or not the e-mail address given is valid. If the e-mail address is a person's name, check to see if it matches the cardholder's name. These, among other things, are red flags to look for.

If an order is to be shipped to a different address, then the cardholder’s phone is the most crucial piece of information you can get. Follow the verification steps above by calling the issuing bank. If the phone number on the order matches, simply place a courtesy call to the customer to make absolutely certain it is the cardholder making the purchase. Cardholders welcome the added precaution.

If the phone number on the order does not match what the bank has on record, send the customer an email asking for the correct billing phone number. In the meantime, try to find the cardholder’s phone number by visiting whitepages.com. Verify each number with the bank to make certain it is the real cardholder’s number before calling. Keep detailed notes to refer to later. Again, follow your gut instinct. If something just doesn’t feel right about the order, void it and don’t ship the merchandise.

While there’s no guarantee you will be chargeback free this holiday season, taking the extra precautions to carefully verify all credit card transactions will help minimize your risk of be coming a victim of credit card fraud. If you're concerned about becoming a victim of credit card fraud, you may want to look into some of the fraud protection solutions now available for merchants.

Michelle Rahm of JewelryImpressions.com is a recognized expert in online fraud prevention. Rahm has spoken to a number of groups, written articles and been an interview subject for a number of leading trade, Internet and media outlets. Contact her at (970) 535-4139.

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